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UK retailers suffer worst Christmas in a decade

British retailers failed to increase their Christmas sales for the first time since the depths of the global financial crisis a decade ago, adding to signs of an economic slowdown ahead of Brexit.

Consumer spending appears to be fading fast after a summer surge as concerns among shoppers about the outlook for 2019 outweigh the benefit from weaker inflation and a modest pick-up in wages.

Britain’s economy slowed after the 2016 Brexit referendum and looks to have lost more momentum in late 2018 as Prime Minister Theresa May struggles to get parliament’s support for her plan for a smooth exit from the European Union in less than three months’ time.

The British Retail Consortium (BRC) said its members reported zero year-on-year total sales growth in December, the worst performance for the month since 2008, even as many Britons reined in their spending in November before leaving it late to shop for Christmas gifts in December.

The flat figure was down from growth of 0.5 percent in November and 1.4 percent in December 2017.Like-for-like sales, which strip out changes in store space, dropped by 0.7 percent, the biggest fall since October 2017 excluding distortions caused by the timing of the Easter holidays.

"This comes despite some retailers desperately attempting to generate sales through slashed pricing, which has seemingly not been enough to encourage shoppers," said Paul Martin, a partner at accountants KPMG.

“This comes despite some retailers desperately attempting to generate sales through slashed pricing, which has seemingly not been enough to encourage shoppers,” said Paul Martin, a partner at accountants KPMG who sponsor the survey.

A broader measure of consumer spending from Barclaycard showed spending grew by just 1.8 percent in December, down from an increase of 3.3 percent in November.

It was the slowest rise since March 2016 and represented a real-terms contraction after taking inflation into account.

Falling spending on clothing and at supermarkets was partly offset by strong rises in purchases at pubs and restaurants, which is not included in the BRC data.

“Many Brits were more modest in their approach to Christmas spending compared to 2017, cutting back on the essentials to balance the costs of the festive season,” Barclaycard director Esme Harwood said.

Fifty percent of Britons surveyed last month were concerned about a decline in the UK economy over the coming year, up from 43 percent in 2017, according to Barclaycard.

Barclaycard’s figures are based on credit and debit card spending between Nov. 18 and Dec. 22, while the BRC data cover Nov. 25 to Dec. 29.

Trading updates released on Thursday showed that Marks & Spencer suffered another quarter of falling underlying sales in both clothing and food, while department store Debenhams is looking for fresh funding after its sales tumbled.

John Lewis, the employee owned biggest department store, said demand for beauty products and women's clothing had enabled it to nudge up sales but its gross profit margins remained under pressure in the "intensely competitive pricing environment".

"I would say that on average the promotional activity was something in the region of 20 to 30 percent higher than last year," Paula Nickolds, managing director of John Lewis department stores, told reporters.

Debenhams Chief Executive Sergio Bucher said the country's second biggest department store group would have to find another 80 million pounds of costs to cut in order to protect its profits after slashing prices.

"The market in general has been very, very competitive," he told reporters.

TESCO STANDS FIRM

Tesco , Britain biggest retailer, emerged as one of the few winners from the festive period after its own-brand basic ranges combined with premium offerings to fend off rivals at the top and bottom of the market, and keep its tills ringing.

It attracted 125,000 more shoppers to its stores this Christmas than last, with December 23 the busiest Sunday in Tesco's history. In just one hour it served 766,000 customers.

The solid performance stood in contrast to rivals Sainsbury's and Morrisons which both missed Christmas sales forecasts this week, hit by competition from German discounters Aldi and Lidl.

Richard Hunter, head of markets at Interactive Investor, said Tesco had defied the retail gloom, but even it will need to continue to perform strongly to maintain its market rating.

"Prospects for the UK economic environment remain nebulous, with a nervous consumer potentially looking to shop on price alone," he said.